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Suspicions Mount Over Possible Money Laundering and Terrorism Financing at Iraqi Financial Institutions

Iraq’s financial institutions are under scrutiny after reports emerged that they may be complicit in money laundering and terrorism financing activities.

Requirements for Customer Verification

According to Article 10 of Iraq’s anti-money laundering (AML) and combating the financing of terrorism (CFT) law, financial institutions must verify customer identity whenever doubts arise about the accuracy or adequacy of previously obtained information. The institutions are also required to delay verification until after establishing a business relationship, as per regulations issued by supervisory authorities.

Record Keeping Requirements

Article 11 of the law requires financial institutions and designated non-financial businesses and professions (DNFBPs) to maintain records of:

  • Customer identification documents
  • Transaction records
  • Suspicious transaction reports
  • Risk assessment records

These records must be available to competent authorities in a timely manner, and must be kept for five years after the business relationship ends or a transaction is carried out.

AML/CFT Program Obligations

Article 12 outlines the obligations of financial institutions and DNFBPs, including:

  • Establishing AML/CFT programs that assess money laundering and terrorism financing risks related to their business
  • Implementing policies and procedures to mitigate identified risks
  • Providing ongoing training for employees

Financial institutions are also required to refrain from opening or maintaining anonymous accounts, abide by sanctions imposed on individuals and entities involved in money laundering and terrorism financing, and report suspicious transactions to the Office of Financial Intelligence (OFI) immediately.

Consequences of Non-Compliance

Financial institutions that fail to comply with AML/CFT obligations may face severe consequences, including being barred from opening new accounts or conducting transactions. The law also requires financial institutions to maintain a special administrative department for combating money laundering and terrorism financing to follow up on the implementation of the law’s provisions.

Terrorist Funds Freezing Committee

Article 15 establishes the Terrorist Funds Freezing Committee at the Secretariat of the Bank, which will be responsible for freezing the funds of terrorists or other assets of individuals designated by the UN Sanctions Committee. The committee will consist of representatives from various government agencies and institutions.

The formation of this committee is seen as a major step in combating terrorism financing and money laundering in Iraq, where financial institutions have been accused of facilitating these activities.